Students Turning To Credit Cards For Tuition

College students are using credit cards more than ever to pay for their education, and they're carrying high balances on those cards, a new report suggests.

Students who used credit cards for tuition, books and other direct college expenses last year charged an average of $2,200, up from $942 four years ago, according to the survey conducted by private lender Sallie Mae. The study suggests students are using credit cards instead of other financial aid, including grants and private loans.

About 30 percent of students put tuition on credit cards, up from 24 percent in 2004, when the study was last conducted.

The survey states 92 percent of undergraduate holders of credit cards charged textbooks, school supplies or other direct education expenses, up from 85 percent in the previous study.

"Too many students are at risk of overpaying for college by pulling out credit cards to pay for textbooks or even part of their tuition bill, instead of using less-expensive financial aid to cover these items," said Marie O'Malley, director of consumer research for Sallie Mae and author of the study.

One Florida Atlantic University graduate, for example, is struggling to pay off thousands of dollars in credit card debt.

Josef Palermo, 24, graduated from FAU in Boca Raton last year and now lives in Washington, D.C. He used three credit cards to pay for tuition, books and living expenses. Interest rates were as high as 18 percent, he said.

He had maxed out his federal student loans and found credit cards quicker and easier than seeking private loans.

He declined to discuss the amount he owes but said it's overwhelming.

"I wonder if I'll ever be able to get a home of my own with the kind of debt I have now and the marks against my credit," said Palermo, who has a job. "I worry about my future."

More students at Palm Beach Community College are using credit cards to pay for tuition, Controller James Duffie said. It's now the top way to pay, he said. Much of that is due to the growth of online payments.

"It's just the ease and convenience of it all," he said. "People can pay at 4 in the morning."

Several student credit cards have interest rates of 14.99 percent for those with good credit, according to the Web site bankrate.com. Federal Stafford loans have interest rates of 6.8 percent. Private school loan rates average about 8 percent, according to bankrate.com.

O'Malley said students and families may be underestimating college costs and are using credit cards to fill the gaps.

Using a credit card may be the only way for some to continue a college education in this tempestuous economy.

"I think what's happened is since the economic meltdown eight months ago, families are strapped and they don't want their child's education interrupted, so I think a lot of families may be using their child's credit card," said Bill Hardekopf, of LowCards.com, a consumer resource on credit cards. He cautioned that students and parents need to be aware of their card limits to avoid over-limit fees, which can be $30 per transaction.

The report found 60 percent of students surveyed were surprised at their high balances, and 40 percent said they charged items knowing they didn't have money to pay the bill.

About 17 percent said they regularly paid off all cards each month, and another 1 percent had family members paying the bill. The remaining 82 percent carried balances, incurring high monthly finance charges.

Scott Travis can be reached at stravis@SunSentinel.com or 561-243-6637.